China's Q2 GDP growth beats estimates

6.9% growth gives leaders a room to focus on debt risks

China's economy expanded faster-than-expected in the second quarter, setting the country on course to comfortably meet its 2017 growth target and giving policymakers room to tackle big economic challenges ahead of key leadership changes later this year.

The boost to growth was in part driven by firmer exports and production, in particular steel, which could heighten trade tensions as the United States and China begin economic talks this week. US President Donald Trump has made the US trade deficit with China a top agenda item in bilateral talks and has also flagged the steel trade as a point of contention.

China's gross domestic product rose 6.9 per cent in the second quarter from a year earlier, the same rate as the first quarter, the National Bureau of Statistics said on Monday. That was higher than analysts' expectations of a 6.8 per cent expansion.

Economic data from the second quarter has prompted a number of analysts to upgrade their GDP forecasts for China for 2017, although some moderation in growth is expected later this year as policymakers' efforts to rein in property and debt risks weigh on activity.

"In general, we expect GDP growth to remain robust in the second half but slower than the first half, due to the high base," Citi economists said in a research note. "Looking ahead, uncertainty remains on investment and trade." The bank has raised its 2017 annual GDP projection to 6.8 per cent on-year from 6.6 per cent previously.

The robust numbers kept world shares near a record high and briefly helped China's major stock indexes recoup earlier losses.

The second quarter numbers put the economy on a strong footing to meet China's growth target of around 6.5 per cent in 2017, which would give policymakers room to defuse financial risks.

While growth in the high-flying property sector has cooled this year, a rebound in exports after several years of decline has helped prevent any broader slowdown in China's economy.

Retail spending and factory output were also bright spots in the first half. Retail sales growth picked up to 10.8 per cent in the second quarter from 10.0 per cent in the first quarter, a Reuters calculation based on official data showed.

Factory output also picked up in the second quarter, though the 6.9 per cent growth for the first half was only a slight pickup from recent quarters.

The improving economy is no doubt welcome news ahead of an autumn congress of the ruling Communist Party of China, at which President Xi Jinping is widely expected to tighten his grip on power, with leadership keen to ensure a smooth run-up to the meetings.

Looking ahead

Growth in the high-flying property sector has cooled this year

A rebound in exports after several years of decline has helped prevent any broader slowdown in economy

GDP numbers put the economy on a strong footing to meet annual growth target of 6.5%

Retail sales growth picked up to 10.8% in the Q2 from 10% in the Q1